Business Strategy and Planning

Business Strategy and Planning

Stephen Burgess (Victoria University, Australia), Carmine Carmine Sellitto (Victoria University, Australia) and Stan Karanasios (Leeds University Business School and AIMTech Research Group, UK)
DOI: 10.4018/978-1-60566-224-4.ch004
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Abstract

In the previous chapter we highlighted the importance of planning for an effective Web presence. In fact, the existence of a disciplined planning approach is seen as an enabler for the effective use of ICTs and e-commerce in small businesses,whilst short-range management perspectives and lack of planning are viewed as barriers. This chapter builds on the tenets identified in the previous chapter to examine how a small business might prepare itself for a Web presence. We believe that small business operators/ managers should know their strategic business direction before they consider establishing a Web presence. We will commence by investigating some basic business theory.
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Introduction

In the previous chapter we highlighted the importance of planning for an effective Web presence. In fact, the existence of a disciplined planning approach is seen as an enabler for the effective use of ICTs and e-commerce in small businesses, whilst short-range management perspectives and lack of planning are viewed as barriers (Figure 1).

Figure 1

This chapter builds on the tenets identified in the previous chapter to examine how a small business might prepare itself for a Web presence. We believe that small business operators/ managers should know their strategic business direction before they consider establishing a Web presence. We will commence by investigating some basic business theory.

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Competitive Forces

It is necessary for a small business owner/manager to understand the environment in which the business operates and exists. More than twenty years ago, Porter and Millar (1985) proposed a model that related to competitive forces (refer Figure 2) in an endeavour to assist managers to identify strategic information and communication technology opportunities. Although this model was suggested in a time when ICT adoption was nascent, the basics of the model still tend to hold today. Indeed, Porter in 2001 updated the model in the Harvard Business Review to take into account the value of ICTs. He suggested that that it had become evident that for many businesses it was not whether to deploy ICT, but how to use the technology as a competitive part of business strategy - a strategy that complemented some of the traditional ways that they went about their business (Porter 2001).

Figure 2.

The five competitive forces model (adapted from Porter & Millar 1985)

In planning for a Web presence, a small business should consider those aspects of the competitive forces model that relate to the business. As we are considering setting up the Web presence to deal with customers we will not discuss suppliers as a competitive force. However, they remain an important part of a business’ supply chain. We will now briefly consider the different competitive forces.

Customers

For this book, customers are the target of our Web presence. Chapter VIII covers how a small business Web presence can be promoted to customers. However, it is also important to know whether customers are ready to do business online and, if they are, what they expect. This will be discussed later in this chapter. Arguably, the advent of ICTs has strengthened the bargaining power of customers due to the increased number of products and services that they can access. Previously, access to products and services was restricted by geographical region, whilst now buyers can potentially source their requirements from any business in the world that has a Web presence and the ability to distribute its products and/or services to them in a timely and cost effective manner.

Substitute Products/Service

A substitute product is used to replace an existing product. A recent example of this has been the introduction of ‘digital’ music, which can be downloaded online, competing with the compact disc (which replaced cassette tapes, and so on). It is important for small businesses to key an eye out for what might be happening in their industry, especially if it is an area of constant innovation or change.

New Entrants

This occurs when a new competitor enters the market. These new competitors or entrants to an industry can be a considerable threat because they bring a desire to gain market share, may undertake industry activities in new and innovative ways, and sometimes have a substantial amount of resources. It is beyond the scope of this book to discuss strategies to combat new entrants, however, these strategies can include building barriers to entering an industry sector and attempting to lock existing customers of the business into long term agreements.

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